Many employees prefer to set up personal, "portable" pensions of their own. Those who are self-employed also do so, of course.

In this case, as with defined contribution schemes, contributions are set aside in the pension plan and, most commonly, used to purchase an annuity before age 75.

One of the great attractions of pension schemes as a method of saving for retirement is that there is tax relief on contributions up to government set contribution limits. There is no other investment you can make which will give you 20% or 40% tax relief, depending on the highest rate of tax you pay.

Which sounds most appealing, paying tax to the government or saving it for your old age?

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